Universal Technical Institute (NYSE:UTI): A Strong Affordable Growth Stock with Solid Fundamentals

Investors looking for growth opportunities at fair prices often consider the "Affordable Growth" strategy, which focuses on companies with strong growth potential that are not overvalued. This method balances fundamental strength and profitability while ensuring the stock price aligns with its true worth. Universal Technical Institute (NYSE:UTI) stands out as a potential match for this strategy, performing well in growth and profitability while staying reasonably priced.

Growth Potential

Universal Technical Institute (UTI) shows strong growth performance, receiving a Growth rating of 7/10 in ChartMill’s fundamental analysis. Key points include:

• Earnings Per Share (EPS) rose 188.89% over the past year, far exceeding industry averages.
• Revenue growth has been steady, climbing 14.69% annually, with a five-year average of 17.19%.
• Future projections indicate continued progress, with EPS expected to grow at 17.88% per year and revenue forecasted to rise by 9.69%.

These numbers suggest UTI is not only growing quickly but is also likely to maintain this pace, a key factor for growth-focused investors.

Valuation Analysis

Despite its growth, UTI remains fairly valued, scoring 5/10 in Valuation:

• Its Price/Earnings (P/E) ratio of 30.84 aligns with industry peers, though slightly higher than the S&P 500 average.
• The Price/Forward Earnings ratio of 29.63 reflects market expectations for future growth without being excessive.
• A low PEG ratio (factoring in earnings growth) hints the stock may still be undervalued relative to its growth prospects.

For investors seeking growth at a fair price, UTI’s valuation metrics suggest it isn’t overpriced despite its positive trends.

Profitability and Financial Stability

Profitability is another strong point, with UTI scoring 7/10 in this area:

• Return on Equity (ROE) of 19.54% places it in the top 14% of its industry, showing efficient use of capital.
• Operating margins have increased, reaching 9.94%, indicating better cost control.

Financial stability is acceptable (6/10), though there are minor issues:

• A solid Altman-Z score of 4.06 points to low bankruptcy risk.
• Debt levels are under control, with a Debt-to-Equity ratio of 0.31, though liquidity ratios are only average.

Why It Matches the Affordable Growth Strategy

The Affordable Growth strategy looks for stocks with strong growth, fair valuations, and solid fundamentals, all of which UTI provides. Its high growth figures make it appealing, while its reasonable valuation avoids speculative pricing. Additionally, its strong profitability and stable financial health help minimize risks, making it a well-rounded choice for growth-focused portfolios.

For a closer look at UTI’s fundamentals, check the full analysis here.

Discover More Affordable Growth Stocks

If UTI meets your investment needs, you might find other options by using the Affordable Growth Stock Screener.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Always conduct your own research before making investment decisions.